Mortgage Insurance

AAA

DEFINITION of 'Mortgage Insurance'

An insurance policy that protects a mortgage lender or title holder in the event that the borrower defaults on payments, dies, or is otherwise unable to meet the contractual obligations of the mortgage. Mortgage insurance can refer to private mortgage insurance (PMI), mortgage life insurance, or mortgage title insurance. What these have in common is an obligation to make the lender or property holder whole in the event of specific cases of loss.

Private mortgage insurance may be called "lender's mortgage insurance" (LMI) if the premium on a PMI policy is paid by the lender and not the borrower. This is typically done in exchange for a higher rate or fee structure on the mortgage itself.

INVESTOPEDIA EXPLAINS 'Mortgage Insurance'

Mortgage insurance may come with a typical pay-as-you-go" premium payment, or may be capitalized into a lump sum payment at the time the mortgage is originated. For homeowners who are required to have PMI because of the 80% loan-to-value ratio rule, they can request that the insurance policy be canceled once 20% of the principal balance has been paid off.

Mortgage life insurance can be either declining-term (the payout drops as the mortgage balance drops) or level in its payout, although the latter costs more.

RELATED TERMS
  1. Private Mortgage Insurance - PMI

    A policy provided by private mortgage insurers to protect lenders ...
  2. Forced Place Insurance

    The insurance that a lien holder places on a property, to provide ...
  3. Price-to-Rent Ratio

    A mathematical calculation utilized in the Trulia Rent Vs. Buy ...
  4. Constructive Total Loss

    A constructive total loss is an insurance term where the cost ...
  5. Mutual Mortgage Insurance Fund

    A fund that insures mortgages made by the Federal Housing Administration ...
  6. Loan-To-Value Ratio - LTV Ratio

    A lending risk assessment ratio that financial institutions and ...
Related Articles
  1. Insurance

    Insurance Tips For Homeowners

    Use these simple ideas to save money and get better coverage for your house.
  2. Insurance

    15 Insurance Policies You Don't Need

    Learn how to save money by saying "no" to unnecessary coverage.
  3. Home & Auto

    6 Reasons To Avoid Private Mortgage Insurance

    This costly coverage protects your mortgage lender - not you.
  4. Credit & Loans

    Understanding The Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  5. Insurance

    Who are the best-rated life insurance companies in the US?

    Learn about what makes an insurance company the best. Read about the best life insurance companies in the U.S. in 2014, following ratings by Weis.
  6. Insurance

    What are some examples of when insurance bundling is a bad idea?

    Learn about situations where insurance bundling may not be a favorable option. Bundling insurance is often a good idea, but there are times when it isn't.
  7. Home & Auto

    Where are home values falling the fastest in the US, and why?

    Learn about the metropolitan areas in the United States experiencing the largest drops in median single family homes values in 2014 and the reasons behind it.
  8. Insurance

    What are some examples of unexpected exclusions in a home insurance policy?

    Learn about commonly excluded perils with different standard insurance policies. Explore events that homeowners should consider when purchasing insurance.
  9. FHA mortgages offer flexibility and low down payments, though they're often pricier than traditional loans backed by private mortgage insurance.
    Credit & Loans

    Before You Choose An FHA Mortgage: 7 Key Points

    FHA mortgages offer flexibility and low down payments, though they're often pricier than traditional loans backed by private mortgage insurance.
  10. Thanks to the Affordable Care Act, you can no longer be denied health insurance for having a pre-existing or chronic medical condition.
    Insurance

    Choosing A Health Plan For Your Chronic Illness

    Thanks to the Affordable Care Act, you can no longer be denied health insurance for having a pre-existing or chronic medical condition.

You May Also Like

Hot Definitions
  1. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  2. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  3. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  4. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  5. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  6. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
Trading Center